Before the Mumbai Tribunal in [2026] 184 taxmann.com 340 (Mumbai – Trib.), a question arose as to whether a delay in filing Form 10-IC is purely procedural and does not invalidate the substantive exercise of the option by the taxpayer under Section 115BAA in the return of income.
In its decision, the Tribunal held that once all the conditions prescribed under Section 115BAA are duly complied with, and no prejudice is caused to the Revenue, the delay in filing Form 10-IC ought to be condoned. It observed that the form is merely a procedural mode of intimation and cannot override the substantive act of exercising the option in the return. Accordingly, it directed the AO to accept the assessee’s option under Section 115BAA and recompute the tax liability at the concessional rate in accordance with law.
This ruling by the Mumbai Tribunal clearly states that the filing of Form 10-IC is only the prescribed procedural mode for intimating such an option. What is relevant is how the taxpayer has acted while filing the return of income.
In the light of this ruling, a taxpayer may have the flexibility to opt in or opt out of the scheme through a validly filed return of income, as the time limits for filing the form are considered directory and procedural. Accordingly, a taxpayer may exercise or withdraw the option in a proper return filed under sub-section (1), (4), or (5), or even while updating such return under sub-section (8A) of section 139, provided no prejudice is caused to the Revenue. This is because opting under Section 115BAA results in a lower tax rate but also entails the forfeiture of specified deductions and incentives.
While redefining its appellate powers under Section 254, the Bench also held that where all relevant facts are on record and the issue is purely legal, the Tribunal is competent to grant a statutory benefit even if the claim was not made in the prescribed manner, provided the assessee is otherwise eligible.